By Riley Uglum, OD
In last month’s article we looked at how important marketing systems are to the sustained growth of a private practice. But it’s easy to spend dollars foolishly if we don’t have another system that measures the Return On Investment (ROI) for a particular marketing campaign. We should be doing the same for any investment we make in our practice, whether it be a new piece of equipment, hiring more staff, taking on a new frame line, etc.
In our office, we play Jack Stack’s Great Game Of Business. Part of this game requires that each staff member and doctor track a key performance metric. In addition to tracking it, they must also have a strategy for how they can positively affect this number to increase business growth and profitability. Some metrics are expense oriented and others drive revenue. The number that I track is our marketing ROI. My job is to be sure we are spending our marketing dollars wisely and that they are truly growing the business
A typical marketing campaign will drive existing and prospective patients into an automated marketing funnel. ROI is calculated with the following formula:
ROI = (RG-C)/C
where RG = Revenue Generated and C = costs involved with that campaign.
If we generate $2000 in revenue and costs were $500 our ROI would be 3 or 300%
If it cost us $1500 to generate that same $2000 in revenue, the ROI would be 33%
Typical marketing costs would be the TV, radio, newspaper, Facebook, Google, newsletter or direct mail ads involved with moving patients into the campaign plus the cost of the automation software subscription for that time period. You may also elect to include lab expenses or other cost of goods sold in the calculation if this is a special promotion. Just be sure you calculate ROI the same each time so you aren’t comparing apples to oranges. It’s pretty easy to learn which campaigns are profitable and which are not. The good ones are innovated to make them even better. The bad ones are discarded and we don’t keep throwing good dollars after bad.
As much as I love technology, automation and innovation in business, I understand that we can create an amazing ROI by simply going back to an “old school” practice management philosophy – reactivation. I did a quick search of patients that hadn’t had an exam for over a year and that didn’t have email (we automate reactivation on patients with email). This list was then printed and shared with our front desk staff so they could call and fill any short term gaps in our appointment book due to cancellations or reschedules. Let’s take a look at the ROI for this system.
Revenue can be calculated by multiplying the number of appointments scheduled from that list by the practice’s average revenue per patient metric. The costs involved are ZERO! So the ROI is infinite because that’s the result of any number divided by zero. The reason there are no additional costs is because we are already paying our staff to be there. There is no significant increase to the phone bill. The lights are on and the AC is running anyway. In other words, there are no additional line item marketing expenses in the accounting system as a result of running this system.
Another BIG advantage of this strategy is that we have shortened the sales cycle for these overdue patients. Measuring the the additional ROI from that is beyond the scope of this article, but the benefits are significant. What other systems you can think of that might provide high ROI and low costs like this one? How about –
- Checking to see if any other family members are due for an exam and offering to make that appointment as patients check out
- Offering to remove unsightly bumps on patients eyelids and reappointing them for that procedure
- Explaining benefits of trying temporary punctum plugs to see if they will improve dry eye symptoms
- Offering an attractive 2nd pair promotion during their exam
- Having your lab send someone to do “in house” optical sales training
- Providing genetic testing to determine what macular degeneration supplement is most appropriate and then selling patients that supplement
- Giving patients a brief tour of your vision training area and offering a low cost reading skills evaluation to children
External marketing is important for attracting new patients. But the costs will be higher (and ROI lower) than when we internally market to the patients that already love us. In either case, be sure that you always measure ROI and get rid of the systems that don’t measure up.
Photo: Copyright: donskarpo / 123RF Stock Photo
Dr. Riley Uglum is a 38-year veteran of the optometry profession and is President of Eye Care Associates Of New Hampton. He is also the founder and CEO of Promethean Ventures, a company whose mission is to help private practice health care practitioners prosper by combining systemic health care strategies with time tested wealth creation tools. He has co-authored a book titled The E-Myth Optometrist with Michael E. Gerber, and is a Michael E. Gerber Partners’ Company author and founding partner. Dr. Uglum is also executive director of the National Wellness Alliance. He can be reached at email@example.com